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Emirates pushing out Qantas on Sydney route: report

Australian flag carrier could be forced to partially back out of the Sydney-Dubai route following Emirates’ surge, says CAPA

By Courtney Trenwith

Thu 28 Aug 2014 01:31 PM

Dubai-based Emirates Airline’s surge into the Sydney market could force its alliance partner, and the Australian flag carrier, Qantas to partially back out of the long distance route, airline analysts have said.

Emirates now commands 60 percent of capacity on UAE-Australia routes after increasing its network and upgrading aircraft on several services to the A380.

The UAE national airline Etihad (20 percent) also has taken over Qantas, relegating it to third position with 17 percent. Virgin Australia has the last 3 percent, according to airline analysts at CAPA.

The UAE has become Australia’s major thoroughfare for European destinations, particularly with the partnership formed between Qantas and Emirates in March last year, which saw the Australian airline move its hub in Singapore to Dubai.

Virgin Australia also uses its closer ties with Etihad, which owns about 20 percent of the Australian airline, to boost network capacity in Africa, Europe and the Middle East.

Since September, 2011 weekly seats between Sydney and Dubai have increased from 13,321 to 31,248 as Qantas moved its hub there and Emirates upgraded to A380 aircraft, CAPA said.

“There is a significant possibility of overcapacity developing between Sydney and Dubai,” a report by the organisation released on Thursday says.

“Qantas is the weaker partner and may need to admit its aircraft would be better positioned elsewhere.”

The report said the Australian airlines were increasingly relying on UAE carriers to take passengers to Europe beyond the UAE.

“Both Qantas and Virgin Australia use their respective UAE airline partners aggressively to access European and other markets,” the report says.

“They mostly do it virtually; that is they rely on codeshares on the metal of their partners, Emirates and Etihad respectively. The UAE airlines fly the routes for the Australian airlines.

“To that extent, the two Gulf airlines have become an integral - and essential - part of Australian aviation.”

The capacity warning comes as Qantas announced an enormous $2.8 billion after tax loss for the full 2013-14 financial year, mostly accrued by its international arm.

CEO Alan Joyce said the “unacceptable” result was partly due to the cumulative effect of two years of market capacity growth outstripping demand, as well as a record high fuel cost of $4.5 billion.

The airline also is part-way through its $2 billion Qantas Transformation program, including 5000 redundancies and early aircraft retirement. It also completed a non-cash write-down of $2.6 billion to the value of the Qantas International fleet during the year.

However, he said the record losses were behind the airline and the Australian government’s recent landmark decision to relax laws on foreign investment in the airline’s international arm would help it return to profit.

A funding injection into its international division would allow Qantas to better compete on price and service offerings with rivals whom it says are bolstered by unlimited funding from wealthy state backers, Reuters said.

It would also support Qantas' plans to re-configure its aging fleet, invest resources in popular routes and further enlarge its global network, partly through its partnership with Emirates Airline.